RBI may not cut interest rates as inflation levels still high

Mumbai: With retail inflation continuing to remain at elevated level, the Reserve Bank is unlikely to cut interest rates in its upcoming monetary policy review this week. The RBI will unveil its fourth bi-monthly policy on September 30.

Echoing the similar view, Bank of Baroda Executive Director Rajan Dhawan said, "I think RBI would not change interest rate in the policy review because of inflation overhang."

Credit rating agency Care Rating said RBI has less room to cut policy rates on September 30 as there remains an upward threats to inflation going ahead.

"Given the economic parameters of improving growth of 5.7 percent (Q1 FY15) GDP and elevated retail inflation on the back of potential threats to inflation going ahead, we do not foresee any room for a rate cut in the upcoming policy announcement," Care said in a report.

In a hint to the market that the cut in interest rates is still far away, RBI Governor Raghuram Rajan had recently said there was a need to 'break the back' of inflation which remains high.

"The real problem is inflation that is persistent. We have been emphasising again and again in order to 'break the back' of inflation, we got to break this persistence," Rajan had said at an event.